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Models and Incentives for Engagement

Vaccines and medicines are best made by industry, and without industry being an active participant nothing will happen, Yamada said. If the Ebola outbreak is thought of as a health issue, then it fits the fundamental model of the pharmaceutical industry, which is to make medicines and vaccines at a profit and share the profit with shareholders. However, if the Ebola outbreak is thought of as a national or human security issue, then the responsibility of industry expands beyond the profit model to helping the world overcome a health crisis. In this context, he said, industry would be unlikely to self-finance an Ebola vaccine development program; there should be other participants at the table. Invited speakers and participants discussed partnership approaches, sustainable and effective business models, and existing and promising incentives that support the research and development of medical products for emerging infectious diseases (highlights and main points are summarized in the box below).

PUBLIC–PRIVATE PARTNERSHIPS AS THE ESSENTIAL OPERATING MODEL

The Global Health Innovative Technology (GHIT) Fund

BT Slingsby, CEO and Executive Director of the Global Health Innovative Technology (GHIT) Fund, described the GHIT Fund as a case example of how incentives can be aligned to bring different funders and partners together in order to drive forward product development for global health.¹ Slingsby concurred with Chan that the lack of innovations and products to eliminate and control neglected diseases is a failure of market incentives. He cited a recent study showing that, of 336 new drugs approved in 2000-2011, only 1 percent (four) were for neglected diseases (Pedrique et al., 2013). This failure of market incentives is due, in large part, to the inability to demonstrate a return on investment. A solution to address this market failure, he said, is public–private partnerships.

The GHIT Fund is a unique Japanese partnership to drive forward global health product development using Japanese innovation, technology, and capabilities. Twenty-five percent of the funding comes from the private sector (Japan’s leading pharmaceutical companies); 25 percent comes from the civil sector, The Bill & Melinda Gates Foundation (BMGF), and the Wellcome Trust (WT); and the Japanese government matches the private sector and philanthropic contributions, making up the remaining 50 percent. Slingsby pointed out that there is no link between the cash donated by the private sector and any funds awarded to those companies for product development.

Each GHIT Fund investment, regardless of the size of the investment, is awarded to an international partnership between a Japanese entity and a non-Japanese entity. In its first 2 years, the GHIT Fund invested roughly $43 million in product development, which has been leveraged through a co-funding strategy into a $73 million product portfolio. The current portfolio includes 39 partnerships, with targeted development platforms spanning discovery through clinical development for drugs, vaccines, and diagnostics targeted to malaria, tuberculosis (TB), and neglected tropical diseases.

The foundation of the GHIT Fund’s success is its clean and transparent governance structure, Slingsby said. There is a council comprising the funders, an independent board of directors, a selection committee, an advisory panel, and a management team. This structure was specifically designed to overcome the conflicts of interest that could occur with having

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¹ For further information about the GHIT Fund see https://www.ghitfund.org (accessed October 30, 2015).

pharmaceutical companies as both funders and beneficiaries of the fund. The council of funders meets yearly, and its decision making is limited to business oversight activities such as approving audited financial statements and changes in the articles of incorporation. This firewall between the council and the rest of the organization precludes the private sector from any of the organizational decision making, including investment decisions.

The success of this unique public–private partnership is further based on the alignment of self-driven incentives, Slingsby explained. The foundation partners, both BMGF and WT, are interested in harnessing the technological prowess of Japanese drug developers and deploying it for global health. Japanese pharmaceutical companies who want to be competitive in the developing world and on the global stage understand the importance of being engaged in access issues pertinent to emerging and frontier markets. Complementary capabilities of the international development sector that act as incentives for companies to partner with the GHIT Fund include localizing their portfolio mix, branding, and building partnerships across sectors. GHIT is also aligned with the global health policies of the government of Japan, including the Japan Revitalization Strategy, the Healthcare and Medical Strategy, and Japan’s Strategy for Global Health Diplomacy. Slingsby noted that each strategy sits within a different ministry of the government (the Cabinet; the Ministry of Health, Welfare, and Labor; and the Ministry of Foreign Affairs). The Japan Revitalization Strategy is an economic policy, and the number one industry taxpayer in Japan is the pharmaceutical sector. From an economic perspective, the government needs these companies to continue to grow and to be competitive on the global stage. The Healthcare and Medical Strategy is focused on bringing innovation from Japan to the global market. Japan’s Strategy for Global Health Diplomacy calls for working with the private sector and funding initiatives to make new and innovative health care technologies more accessible in the developing world (Abe, 2013). Each of the funders has self-driven incentives, Slingsby concluded, and if those self-driven incentives can be aligned, it is not difficult to bring everyone to the same table and discuss how to create an initiative.

The Medicines for Malaria Venture (MMV)

David Reddy, CEO of the Medicines for Malaria Venture (MMV), described MMV as an example of a product development partnership to develop a portfolio of interventions to counter neglected and emerging threats.² MMV is a not-for-profit organization focused on the discovery,

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² For further information about MMV see http://www.mmv.org (accessed October 30, 2015).

development, and delivery of new, effective, and affordable antimalarial drugs. The MMV operating model is to take syndicated investments from governments and philanthropic organizations and work in partnership with those funders, industry, academia, the National Malaria Control Programs, and other agencies to build a virtual drug pipeline. MMV uses independent expert scientific review to guide clinical candidate selection and works within a strong contractual framework with its partners to increase access and good governance. MMV is an integrated global effort with about 250 partners, including 28 pharmaceutical companies, 13 biotechnology companies, and a large number of universities, research institutes, clinical sites, and government agencies. Reddy explained that partners are aligned around common target product profiles, which he said become the guiding principles for the partnerships. The target product profiles are published and become the subject of calls for proposals.

A strength of the product development partnership model is that, in working with its partners, MMV has been able to assemble a network of assays that cover the entire life cycle of the malaria parasite, which can be used to compare candidates in a portfolio of drugs. One key approach to de-risking and accelerating early development has been through the use of translational platforms, in particular, animal models and an induced human subclinical infection challenge model. Working with its partners, MMV has also established a network of clinical trial sites in malaria-endemic countries. Thus far, 12 novel candidates have been identified against 6 new biological targets in the parasite life cycle. This is the type of deep portfolio that is necessary when development of drug resistance is a concern, Reddy said.

Open innovation is also an aspect of the MMV model. With support from BMGF, the Wellcome Trust, and others, MMV has developed the “Malaria Box” containing 400 diverse compounds with antimalarial activity, distilled from 20,000 hits generated from screening of 4 million compounds suspected of antimalarial activity from partners’ compound libraries. The compounds, along with structural and pharmacokinetic information, are available free of charge to researchers, under the condition that they publish their results and place any data in the public domain. To date, around 200 of these boxes have been dispatched across 30 countries. Active compounds have been identified against sleeping sickness, leishmaniasis, cryptosporidium, and schistosomiasis, and there have been 20 scientific publications. With support from its funders, MMV is now assembling a “Pathogen Box” containing a wider range of hits from phenotypic screens.

Creating Scientist Entrepreneurs in the Developing World Through Public–Private Partnerships

Krishna Ella, Chairman and Managing Director of Bharat Biotech, discussed how public–private partnerships can create new entrepreneurs, new vaccines, IP, and publications in the developing world. Ella established Bharat Biotech in India in 1997 to focus on region-specific neglected diseases.³ The business model from the start has been public–private and private–private partnerships. Public–private partnerships in India, he said, can help the local partners to learn new vaccine development; learn good clinical practice and protocols for clinical development; understand global expectations; and change the mindset of Indian institutes regarding public health problems. Private–private partnering can foster an understanding of good manufacturing practice and standards that help a company grow to the next level.

In India, approximately 120,000 children die from diarrheal disease due to rotavirus each year (Bhan et al., 2014). These are primarily poor children with no access to care, and there is little political attention to this public health problem. Ella explained that through a multinational public–private partnership with BMGF, the National Institutes of Heath (NIH), the U.S. Centers for Disease Control and Prevention (CDC), Stanford University, the Research Council of Norway, and others, Bharat Biotech developed Rotavac, India’s first new vaccine, and conducted India’s first efficacy trial (Bhan et al., 2014; Bhandari et al., 2014). The vaccine was launched by the prime minister in 2015, although Ella noted there is an ongoing legal challenge to the launch. Ella described a host of other partnerships that have resulted in vaccines for typhoid, Japanese encephalitis, and other threats, as well as ongoing research on vaccines for chikungunya, paratyphoid and non-typhoidal Salmonella, Chandipura virus, malaria, and other infectious diseases relevant to India.

Ella highlighted the range of challenges the small Indian company has faced, including legal challenges; purchase commitments that were withdrawn; inconsistent government policies and changing priorities; difficulty securing government loans or venture capital; price competition from cheaper products from China; lack of attention to timelines, resulting in delays; and getting the government to recognize emerging threats.

Public–private partnerships can inspire entrepreneurship, Ella concluded, and these partnerships in India help to build confidence in the system and in product development; increase credibility; generate personal satisfaction; foster new development ideas and manufacturing platforms;

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³ For more information about Bharat Biotech see http://www.bharatbiotech.com (accessed October 30, 2015).

provide funding; and create a network that spreads science, develops new vaccines, and builds new IP.

Other Successful Initiatives and Collaborations

Lynn Marks, Senior Vice President for Projects, Clinical Platforms, and Sciences at GlaxoSmithKline (GSK), highlighted several early examples of successful public–private partnerships for product development, including the TB Alliance, the Drugs for Neglected Diseases initiative (DNDi), and MMV (discussed above). More recently, Marks said, industry has been working more directly with government, including the Biomedical Advanced Research and Development Authority (BARDA) within the U.S. Department of Health and Human Services (HHS), the Defense Threat Reduction Agency within the U.S. Department of Defense (DoD), and other government funders, on challenges such as antimicrobial resistance. Rajeev Venkayya, President of the Global Vaccine Business Unit at Takeda Pharmaceuticals, elaborated that the 2001 anthrax attacks in the United States spurred a series of actions in the government, ultimately culminating in the creation of BARDA. Together, BARDA, NIH, CDC, the U.S. Food and Drug Administration (FDA), and other partners make up the Public Health Emergency Medical Countermeasures Enterprise (PHEMCE), which is focused on developing public–private partnerships to deliver medical countermeasures (MCMs) to address such threats. As a result BARDA is now funding 150 products in its MCM pipeline, Venkayya said.

Pharmaceutical companies are also developing new ways of working together to address global health challenges and drive efficient development of new products. Marks described TransCelerate Biopharma, Inc., a nonprofit initiative that demonstrates a new mindset across industry of working together to improve quality, decrease cost, and reduce redundancy in clinical trial efforts.⁴ Marks also described a new “biopreparedness organization” (BPO) that will be housed in GSK’s new vaccine research and development center in Maryland.⁵ The BPO will have end-to-end capabilities to develop new vaccines (including biohazard laboratory facilities and pilot plants) that can be used in collaboration with other companies, funding partners, and stakeholders to focus on the next generation of vaccines for public health threats. Another example is the Tres Cantos Open Lab Foundation in Spain, an independent organization supported by GSK, where visiting researchers can have open access to GSK expertise, processes,

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⁴ For more information see http://www.transceleratebiopharmainc.com (accessed October 30, 2015).

⁵ For more information see http://www.gsk.com/en-gb/media/press-releases/2015/gsk-to-establish-global-vaccines-randd-centre-in-the-us (accessed November 18, 2015).

and facilities including, for example, a high-throughput screening facility and Biosafety Level 3 laboratories.⁶

Based on his experience as Influenza Pandemic Task Force Leader for Roche from 2005 and 2010, Reddy said that important principles in Roche’s pandemic response were establishing networks and partnerships to reduce or share risk; aligning around common principles; advanced planning; and clear, transparent, ongoing communication. Key elements of Roche’s planning activities, he continued, were risk analysis and risk mitigation, forming partnerships to mitigate the risks, acknowledging the World Health Organization (WHO) as the global leader in the event of a pandemic, establishing an advisory board of ethicists, clearly defining and documenting the company’s role during an outbreak, and collaborating with independent research laboratories around the world. To support government pandemic stockpiling of oseltamivir (Tamiflu), Roche increased its seasonal influenza manufacturing capacity 15-fold (from 27 million courses of treatment per year to 400 million per year) through partnerships with other manufacturers around the world. As part of its risk-sharing approach, Roche made payments to partner companies to maintain idle capacity during periods of underutilization. Reddy also stressed the need for a portfolio of products that can take into account the evolutionary biology of emerging infectious agents and drug resistance.

Venkayya mentioned the investments made by BMGF in more than 16 mission-focused product development partnerships. While a company generally leverages its own internal technologies, platforms, and capabilities in advancing a particular product candidate (occasionally licensing in additional capabilities), a product development partnership takes a portfolio approach to developing a tool to address a specific threat, readjusting the portfolio depending on the performance of the program (i.e., stopping programs that are not advancing and reinvesting in more promising options).

CREATING A BLEND OF INCENTIVES FOR ENGAGEMENT OF PARTNERS

Kevin Outterson, professor at Boston University, referred participants to a Chatham House report on a new global business model for antibiotics as an example of incentives for product development in an area of great

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⁶ For more information see http://www.openlabfoundation.org/about.html (accessed October 30, 2015).

need: the global spread of antibiotic-resistant organisms.^7,8 The new model is based on delinking the return on investment for research and development from sales or reimbursement revenues. The model considers funding and incentives for developers while prioritizing both global access and promoting appropriate use of antibiotics (i.e., preventing overmarketing or overuse that could lead to further resistance). Marks concurred with Outterson on the need to delink company investment in product development from the need to drive volume sales and earn revenue to recoup that investment. This is especially true for antibiotics, for which sales of a new product may be heavily restricted to conserve efficacy.

Panelists discussed the need for a combination of both push and pull incentives to motivate product developers.⁹ Venkayya said that pull incentives are usually not sufficient when the market is very uncertain, such as in biodefense or when the threat of a pandemic is unclear (e.g., Middle East respiratory syndrome [MERS]). Marks and Venkayya mentioned priority review vouchers as one example of a pull incentive that could be effective, acknowledging that there are drawbacks (e.g., diverting regulatory agency attention away from more urgent matters to meet the priority review timeline).

Venkayya cautioned that the concept of awarding financial prizes to pharmaceutical companies is generally not publicly or politically palatable. However, Outterson urged participants not to broadly dismiss prizes. A partial delinked incentive approach is more like enhanced reimbursement, he said. For example, a novel drug for very narrow spectrum use might need to be reserved for use in only the most egregious circumstances. A company could be rewarded for implementing a stewardship plan with milestone payments over a 5- or 10-year period (in other words, rewarding the company for rationing the sale of the drug). Developing new antibiotics needs to be seen as something akin to insurance, Outterson said, ensuring the availability of therapies in case the organisms evolve. People are used to the concept of paying for insurance for events that might not occur (and that they generally hope do not occur). Yamada suggested that a portion of insurance premiums could be applied to creating incentives for research

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⁷ The Chatham House report, released on October 9, 2015, is available at https://www.chathamhouse.org/publication/towards-new-global-business-model-antibiotics-delinkingrevenues-sales (accessed October 30, 2015).

⁸ For further background on addressing the global threat of antibiotic resistance see the Special Supplement to volume 43, issue 2, of the Journal of Law, Medicine & Ethics, Summer 2015, pp. 1-78. http://www.aslme.org/media/downloadable/files/links/f/i/file_1_105.pdf (accessed October 30, 2015).

⁹ A push incentive provides funding up front to spur research and development by removing barriers to entry (e.g., grants, tax credits), while a pull incentive provides rewards based on output or impact (e.g., prizes).

and development, allocating money from premiums for use to prevent a pandemic, as opposed to paying out if the pandemic occurs. He noted that the reinsurance company, Swiss Re, has built a very small risk of pandemic influenza into their premium.

Rex and Outterson emphasized that an incentive or reward would need to be substantial to motivate a company to act against its commercial interest. Paul Stoffels, Chief Scientific Officer at Johnson & Johnson, said that lump-sum prizes are not generally attractive to a large pharmaceutical company as they do not contribute to company growth. He suggested that regulatory mechanisms such as pediatric exclusivity have been very successful in bringing new pediatric drugs to market. Stoffels and Yamada suggested that a reward in the form of a transferable 6-month market exclusivity—a hybrid between the pediatric extension and a priority review voucher,¹⁰ Yamada suggested—might be attractive to a company. Rex agreed that a one-time prize is not an adequate incentive for industry, given the realities of the drug development process; instead, he noted, spreading out a reward for innovation over 5 to 10 years (e.g., earning rewards for specific behaviors/milestones) is a better approach. Margaret Hamburg, Foreign Secretary of the National Academy of Medicine, agreed that prizes are not a sustainable economic driver of ongoing innovation; however, she said, prizes could have value in initiating a cycle of innovation and bringing new people and expertise to bear on a problem. Rudi Pauwels, CEO of Biocartis NV, added that the typical diagnostic company does not have the huge resources of a large pharmaceutical company. He agreed that an award or prize is a good way to initiate the nucleation of the innovation, but other types of incentives are needed to ensure that new diagnostics are ultimately delivered.

Slingsby highlighted the need for more push mechanisms that would provide more immediate incentive for companies (e.g., a tax credit), rather than waiting for prizes or rewards at the end. Venkayya said that some push approaches that have worked for product development partnerships include co-investment in research and development, and investment in capital expenditures or capital infrastructure. Outterson noted that there is ongoing discussion about a modified version of the Orphan Drug Act for antibiotics, including a refundable or fully transferable tax credit for qualified research and development expenditures. Much of the antibiotic development work is being done in small- and medium-sized enterprises

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¹⁰ While not presented at the workshop, for further background and criticisms of FDA’s priority review voucher program, see Regulatory Explainer: Everything You Need to Know About FDA’s Priority Review Vouchers at http://raps.org/Regulatory-Focus/News/2015/03/13/21722/Regulatory-Explainer-Everything-You-Need-to-Know-About-FDA%E2%80%99s-Priority-Review-Vouchers (accessed December 2, 2015).

with no taxable income for them to offset, so a fully refundable tax credit represents immediate cash for the company. Ella suggested that a small, privately held company has more flexibility in models for returning value to its investors (and therefore perhaps more flexibility to take risks and innovate for prizes and rewards), whereas a publicly listed company is beholden to the mandate of returning value to shareholders.

ELEMENTS OF SUCCESS

Venkayya and Mel Spigelman, President and CEO of the TB Alliance, both observed that much has been learned over the past 10 to 15 years of forming public–private partnerships to help address the market failures described by Chan. Controlling emerging pathogens cannot be done by any one sector alone, Spigelman said. Formulating a good partnership involves learning how to share sovereignty and decision making, and developing a level of trust between the partners. A successful partnership also relies on leadership on the part of the different partners. Spigelman noted that a partnership must address potential conflicts of interest, pointing to the GHIT Fund, discussed by Slingsby, as a model. He emphasized the importance of coming together to form partnerships and work out these issues far in advance of a crisis.

Venkayya said that product development partnerships can provide accountability, taking responsibility for the portfolio and ensuring that a countermeasure is delivered. Flexibility in the working relationships among participating organizations is also needed, and incentive structures should be developed with input from industry. A supportive ecosystem is also needed (e.g., an environment of adaptive regulation and innovative regulatory science to support these products as they go through development).

Joan Awunyo-Akaba, Executive Director of Future Generations International, Ghana, commented that local civil society organizations and local nongovernmental organizations (NGOs) could be valuable partners in this enterprise and can advocate to promote the work being done by the partnership. They also understand the social determinants of health that are often an overlooked part of the discussion. Dzau highlighted the importance of universities as partners, as they are intellectual drivers of new drugs or new technology and can also play many different roles (e.g., conducting trials). Spigelman agreed, and said that there are academically oriented institutions that now have the type of expertise that once was resident only in the pharmaceutical industry.

CHALLENGES

Venkayya stressed that, before programs can advance, the threat needs to be identified and prioritized. A comprehensive global threat assessment or prioritization has not been done. The U.S. government has developed a list of agents that it is most concerned about from a biodefense perspective, and initial investments were directed toward six categories of potential threat agents.¹¹ BMGF also clearly defined its organizational priorities early on. The U.S. Department of Homeland Security issues material threat determinations for any new threat that requires investment in countermeasures. Outterson added that the Chatham House report calls for a global threat assessment to identify and prioritize bacterial pathogens and guide the targeting of incentives. He noted that CDC conducted a U.S.-based threat assessment in 2013, and the European Centre for Disease Control and Prevention is updating its assessment for Europe. However, such prioritization has not occurred in the global health space, Venkayya said, and there is an urgent need to define what the threats are and assign accountability for developing the tools.

Peter Dull, Deputy Director for Vaccine Development at BMGF, emphasized the importance of having these prioritization discussions now, before the next outbreak, and to move relevant products for those pathogens forward in development to a point where they could be launched into clinical trials should the need arise.

Yamada, Spigelman, and Graeme Bilbe, Research and Development Director at DNDi, discussed that sustainability is a major issue. Spigelman noted a misalignment between the type of funding received and the type of work that these partnerships do. For example, a product development partnership might launch a phase III clinical trial (a multiyear commitment) without having secured guarantees of continued funding from year to year. Participants discussed possible approaches to funding the needed research and partnerships. For example, participants noted that organizations such as BMGF, WT, NIH, and select others tend to fund where others will not, including funding a significant amount of early stage, higher risk research. Yamada added that one of the unique aspects of the GHIT Fund is that BMGF is able to leverage its money, doubling it with the match from the Japanese government.

Yamada and Pauwels both emphasized the need to shift the nature of the discussion from considering these crises to be exclusively health crises to considering them to be issues of human and national security as a means of ensuring that they are prioritized and receive sustainable funding.

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¹¹ For more information see https://www.niaid.nih.gov/topics/biodefenserelated/biodefense/pages/cata.aspx (accessed November 18, 2015).

Yamada noted that DoD recognizes emerging infections as a U.S. national security issue. Perhaps even small, resource-poor nations would invest in infrastructure and research and development if they thought their nation was at great risk, he said.

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